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India Mimics China in Seeking African Energy

Africa is undergoing the great scrabble for its resources since Europeans carved up the Dark Continent in the 19th century.

The latest to enter the fray for Africa’s energy resources is India, which, like China, is a net energy importer, seeking reserves anywhere and everywhere it can.

On 15 March India’s state-owned Oil and Natural Gas Corp. and Oil India Ltd. made a joint bid to acquire up to 20 per cent stake in a giant Mozambique natural gas field. Mozambique’s offshore Area 1, is estimated to hold as much as 70 trillion cubic feet of natural gas resources.

But the deal is not without skeptics in New Delhi. While ONGC Videsh Ltd, the overseas arm of ONGC, India's biggest explorer and OIL made a joint bid for the stake offered by US explorer Anadarko Petroleum Corp (NYSE: APC) and Videocon Group, India’s state natural gas utility GAIL India declined to bid, as it felt the Anadarko Petroleum Corp and Videocon Group asking price of around $4 billion was too high.

Still, whatever yardstick is used, the potential of the deal is huge. Offshore Area 1 natural gas is to be compressed into liquefied natural gas and shipped to overseas markets, including India. The LNG plant in the northern Mozambique’s Cabo Delgado province is scheduled to start operating in 2018 with a capacity of producing 20 million tons of LNG per annum, with the output shared 50-50 evenly between the eventual operators of Mozambique’s Offshore Area1 and Italian firm Eni, which is developing natural gas deposits in Mozambique’s neighboring Offshore Area 4.

And India could certainly use the LNG. According to the authoritative U.S. government’s Energy Information Administration, writing in its “India – country” report, “In 2009, India was the fourth largest energy consumer in the world, after the United States, China, and Russia. Despite a slowing global economy, India's energy demand continues to rise.”

As regards LNG the EIA continues, “According to the International Energy Agency (IEA), hydrocarbons account for the majority of India’s energy use. Together, coal and oil represent about two-thirds of total energy use. Naturalgas now accounts for a seven percent share, which is expected to grow with the discovery of new gas deposits.”

The problem for India is that domestic production of natural gas is rising too slowly to meet surging domestic demand. Hence, the interest in Mozambique, a nearby potential source a short sail across the Indian Ocean. As the EIA notes,” Despite the steady increase in India’s natural gas production, demand has outstripped supply and the country has been a net importer of natural gas since 2004. India’s net imports reached an estimated 429 billion cubic feet in 2010.”

The consortium currently operating in the Area 1 bloc is led by Anadarko, with 36.5 percent of the shares, the other shareholders being Japan's Mitsui with 20 percent, BPRL Ventures and Videocon, both from India, with 10 percent each, and the Thai state PTTEP company, with an 8.5 percent.

But India should not be resting on its laurels, as the “Jornal de Angola” reported on 11 March that “the Chinese state oil company China National Petroleum Corp. is entering oil exploration activity in Mozambique.”

Remember Eni’s in developing natural gas deposits in Mozambique’s neighboring Offshore Area 4? That’s what CNPC is apparently gunning for. According to the Mozambican press, CNPC-Eni talks have been underway for over six months, with CNPC seeking to purchase a 20-70 percent interest In Eni’sArea 4 offshore bloc in the Rovuma Basin, northern Mozambique, near the border with Tanzania. Last month Eni (NYSE: ENI) announced that it had discovered four billion cubic feet of natural gas, along with up to 75 billion cubic feet of potential reserves. Besides Eni, the consortium developing includes Portugal’s GalpEnergia, South Korea’s Kogas and the state Mozambican National Hydrocarbon Company, all with ten percent each.

With India’s ONGC and OIL covertly tussling with CNPC for Mozambique’s neighboring offshore Indian Ocean concessions, few things are certain – beyond Mozambique’s oil and gas officials in the capital Maputo clapping their hands.